ESA Preps For New Round Of Budget Talks In December

After 50 years spent building and sustaining a cumbersome launch sector based on government backing for new developments, Europe is trying something new.

In the first six months of 2014, the European Space Agency (ESA) will sketch the outline of a restructured industrial landscape aimed at building and launching the Ariane 6, a next-generation rocket designed to be more affordable and less costly than the Ariane 5 of today.

Until now, the Ariane family of rockets has been built largely with money contributed by ESA governments seeking to participate in the program, rather than through competitive industry bids. This means governments commit funding to the Ariane program with the expectation of a roughly 90% return on investment in the form of industrial workshare.

But in July, when ESA Director-General Jean-Jacques Dordain presents its 20 member states with industry proposals for building Ariane 6, he will demand government contributions based on best value for money, not geographic return on investment.

“We will do an open competition, tell member states the results, and say, 'Good news, your country got the work. The less good news is now your country has to pay for it,'” Dordain told journalists at an annual meeting where he detailed ESA's €4.1 billion ($5.6 billion) budget for 2014.

While few disagree that ESA's rule of geographic return often hinders European competitiveness, a clean sheet approach to Ariane 6 also poses risks.

“You have to accept the fact that you are creating almost a whole new ecosystem with what it means in terms of risks, learning costs, failures, etc., but also of potential upside and long-term benefits,” says Antoine Gelain, practice leader for aerospace, defense and security at London-based consultancy Candesic. “There are too many vested interests in the European space sector to make this a realistic option.”

With the Ariane 6 design approved in November 2012 and finalized last year, Dordain says ESA expects to sign a €60 million contract for the rocket's Phase B1 development this month.

In parallel, he says binding proposals from industry are expected by mid-February, and in March he hopes to present scenarios for the launcher's development and exploitation between 2015-25, with costs, funding and risks included for each.

Definitive commitments from industry are expected in April and will be finalized in June, before Dordain makes his pitch to member states in July.

As managed by European launch consortium Arianespace, Ariane 5 commands nearly 60% of the commercial launch market today. But new entrants to the launch sector—notably Space Exploration Technologies (SpaceX) Falcon 9 and India's Geosynchronous Satellite Launch Vehicle—are forcing Europe to reconsider its future in the market.

“To have competitive launchers, we need to rethink the launch sector in Europe,” Dordain emphasizes.

Europe's ambition is to build and launch an Ariane 6 for €70 million a pop, a cost target he says cannot be met without increased competition among industry, and a wholesale restructuring of Europe's launch sector.

Consequently, fewer companies will be needed to build the new rocket compared to Ariane 5 today. For example, in the process of consulting with industry, Dordain said ESA has divided the new three-stage rocket into 15 elements, asking companies for best offers to develop them, either individually or in combination with one another.

Dordain said last year that ESA has received more than 160 proposals from industry, “including many from non-space companies” with experience in composite structures.

While such a business model is favorable when designing to cost, its application in the case of Ariane 6 means the new rocket will depend on contributions from fewer governments, likely a leaving a handful of ESA's top financial backers to pay for it.

All of this comes little more than a year after a wrenching dispute between France and Germany over Europe's future launch sector, and just 10 months ahead of a key ESA budget meeting scheduled for Dec. 2, where that future is still to be decided.

Ariane 6, promoted by France, is being developed in parallel with a midlife evolution to the Ariane 5. Known as the Ariane 5 ME, the upgrade is part of a compromise with Germany. The latter's government is uncertain as to the need for a next-generation rocket, but its space industry sector favors continued funding for Ariane 5 ME.

Backers of both rockets say development of a new restartable upper stage common to both rockets will save €700 million in development, reducing the cost if governments decide to approve both programs this year.

But member states will be asked to pay about €1 billion in 2015-18 to complete work on Ariane 5 ME before it enters service in mid-2018. For now, Dordain says, the cost to develop Ariane 6 for entry into service in 2021 is unknown, though industry estimates have pegged the price at €3-4 billion.

In keeping with past budget ministerials, the Ariane decision will be made in the context of other key decisions, including continued funding for ESA's participation in the International Space Station (ISS), another program that has been the subject of Franco-German dispute. Germany has been a backer of the ISS for a long time; France has been less enthusiastic, though they did agree to invest in the project in return for Germany's commitment to Ariane 6.

Combined, the 10 ESA nations that participate in ISS now spend around €650 million per year on the station, using member contributions approved incrementally during the agency's multiyear budget meetings.

At the most recent budget ministerial in November 2012, ESA governments agreed in principle to continue participation in the ISS through 2020, though actual financial commitments amounted to just €1.1 billion to cover continued space station use through the end of this year.

Included in the ISS package was a €250 million tranche of funding to cover preliminary design and early development work on a European service module selected to fly in 2017 on NASA's Orion crew transportation vehicle. Based on Europe's Automated Transfer Vehicle built by Airbus Defense & Space, the service module covers ESA's share of common operating costs on ISS to 2017, estimated at €455 million.

France, which capped its ISS contribution at 20% over the period, asserts the service module does not pose sufficient technological challenge for European industry. The French also urged that its financing be apportioned in segments, leaving member states to approve a second tranche of €200 million this year.

In addition to the service module, ESA ministers will also need to agree in December on continued funding for the ISS beyond the current year. To that end, Dordain says ESA and its ISS industry partner Airbus Defense & Space, have confirmed they are on track to achieve a targeted reduction of 30% in ISS operating costs by 2015, though he was unsure as to the source of these savings.

Initial discussions are also expected on extending the orbiting outpost's operations to 2024, as proposed by the Obama administration during an annual meeting of space agency chiefs in Washington Jan. 9-10. But for now, Dordain says, the space agency can do little more than voice support for the extension until it secures funding from member states for continued ISS participation through the end of this decade.

“I asked member states at our December council meeting and the answer was very positive about the use of the ISS. It is a huge investment, so we should try and get the most out of it we can,” Dordain said. “But our short-term goal is to find funding for it to 2020. Then we will look at under what conditions and circumstances we can continue to be involved.”